Asia Times Online
Mar 3, 2009
By Charles McDermid
HUA HIN, Thailand - Southeast Asian leaders issued an economic rally cry for the region on Sunday, calling for greater coordination to ensure the free flow of goods and taking aim at the protectionist sentiment many of them fear is on the rise in countries such as the United States.
The 10-member Association of Southeast Asian Nations (ASEAN) [1] at its 14th summit also pledged to form a European Union-like economic bloc by 2015 and called for an overhaul of the international finance system to better serve and protect developing nations.
The summit meeting also endorsed a free-trade agreement with Australia and New Zealand and measures to expand a pre-existing emergency foreign exchange pool to bolster regional currencies that come under speculative assault.
"We want to send a strong signal that we are anti-protectionist," Thai Deputy Prime Minister Korbsak Sabhavasu told Asia Times Online. "We see what other countries are doing and we want to signal that while other countries are looking out for themselves - in ASEAN we are helping each other out."
"Regional cooperation becomes even more important as we seek to pursue joint approaches and pool our resources to cope with difficulties that we all face," Asian Development Bank president Haruhiko Kuroda told reporters on Sunday.
But even as ASEAN announced its raft of feel-good policies and delivered its unified mantra of anti-protectionism, economists were scratching their heads as to how the lofty proclamations of togetherness will actually help the fractious region's export-driven economies and shield its 570 million people from rising global economic turbulence.
While ASEAN's anti-protectionism line was clear, mixed messages were rife from individual countries. For instance, it was reported this month that Indonesian civil servants were ordered by the Trade Ministry to buy and use domestic products. Smaller economies such as Cambodia and Laos have long had "buy local" campaigns in place.
It was only a little over two years ago that Thailand imposed capital controls on foreign equity, currency and bond transactions, in a surprise market intervention aimed at curbing the appreciation of the local currency, the baht. In fact, ASEAN's much-touted new charter, ratified in December, includes no mechanisms to stop or punish member countries from implementing protectionist policies.
In an interview with local media last week, Malaysian Prime Minister Abdullah Badawi said it was perfectly normal for countries to protect their domestic industries during an economic slowdown. Abdullah, however, modified his stance in the summit's press finale on Sunday, saying: "All of us are of the same mind: we are anti-protectionist. Countries that are saying 'buy us', countries that are engaging in protectionism - we want to engage with them."
"I think we have to pay a lot of attention, whatever measures we do, we do not give the impression that we are becoming protectionist, that we are turning inwards, because ASEAN depends on this global market," said Singapore Prime Minister Lee Hsien Loong.
The Southeast Asian blitz against protectionism - defined as economic policies restraining trade between nations by way of tariffs and quotas - was seen by some as a thinly veiled challenge to the United States. In an interview with Asia Times Online, US ambassador for ASEAN Affairs Scot Marciel admitted that " ... in the region, there are some people who have put the blame on us".
As the largest importer of Southeast Asian goods, the US's recently approved stimulus package, bent on internal spending and including mandatory American purchases from trade partners, has sent shivers through the region's export-dependent economies.
ASEAN countries have been mired in an economic slowdown that has slashed demand for computer chips, autos and commodities. According to figures released by ASEAN, the region is almost twice as dependent on exports as the rest of the world.
Singapore, Southeast Asia's most trade-reliant economy, is now technically in recession, with two consecutive quarters of negative growth, including a -3.7% year-on-year contraction in the fourth quarter.
Thailand, where exports usually account for over 65% of gross domestic product (GDP), is widely expected to be the region's next recessionary domino. In US dollar terms, Thailand's goods export growth was down 26.5% year-on-year in January. Malaysia recorded its slowest growth in seven years in the fourth quarter while the Philippines saw its goods exports contract over 40% in December.
Still, the summit was bullish about its accomplishments. Attending finance ministers agreed to boost a regional foreign currency pool from US$80 billion to $120 billion. The 10 members of ASEAN plus Japan, China and South Korea - or ASEAN+3 - had arranged to pool bilateral currency swap pacts under the so-called Chiang Mai Initiative - providing a multilateral fund that could be tapped in emergencies.
Southeast Asian currencies have slid in recent months, diminishing the ability of countries hit with short-term liquidity shortages to borrow foreign reserves from other countries to absorb selling pressure on their currencies. "We have learned from previous experience that if we work together, the damage is less when we have a currency crisis," said Malaysian Premier Abdullah, referring to a special regional meeting to address the 1997 Asian financial crisis.
ASEAN heads of state, however, warned that any global economic recovery could take years. "The financial crisis is worldwide. Each ASEAN country, each one of us is affected," said Singapore's Lee. "You could easily be in for several more years of quite slow growth worldwide. And I think it's best that we prepare for that, and our people."
Whether committed to protectionism or free trade, ASEAN countries are in for rocky economic times.
Note
1. The 10 members of ASEAN are Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam.
Charles McDermid is an Asia Times Online correspondent based in Thailand.
Mar 3, 2009
By Charles McDermid
HUA HIN, Thailand - Southeast Asian leaders issued an economic rally cry for the region on Sunday, calling for greater coordination to ensure the free flow of goods and taking aim at the protectionist sentiment many of them fear is on the rise in countries such as the United States.
The 10-member Association of Southeast Asian Nations (ASEAN) [1] at its 14th summit also pledged to form a European Union-like economic bloc by 2015 and called for an overhaul of the international finance system to better serve and protect developing nations.
The summit meeting also endorsed a free-trade agreement with Australia and New Zealand and measures to expand a pre-existing emergency foreign exchange pool to bolster regional currencies that come under speculative assault.
"We want to send a strong signal that we are anti-protectionist," Thai Deputy Prime Minister Korbsak Sabhavasu told Asia Times Online. "We see what other countries are doing and we want to signal that while other countries are looking out for themselves - in ASEAN we are helping each other out."
"Regional cooperation becomes even more important as we seek to pursue joint approaches and pool our resources to cope with difficulties that we all face," Asian Development Bank president Haruhiko Kuroda told reporters on Sunday.
But even as ASEAN announced its raft of feel-good policies and delivered its unified mantra of anti-protectionism, economists were scratching their heads as to how the lofty proclamations of togetherness will actually help the fractious region's export-driven economies and shield its 570 million people from rising global economic turbulence.
While ASEAN's anti-protectionism line was clear, mixed messages were rife from individual countries. For instance, it was reported this month that Indonesian civil servants were ordered by the Trade Ministry to buy and use domestic products. Smaller economies such as Cambodia and Laos have long had "buy local" campaigns in place.
It was only a little over two years ago that Thailand imposed capital controls on foreign equity, currency and bond transactions, in a surprise market intervention aimed at curbing the appreciation of the local currency, the baht. In fact, ASEAN's much-touted new charter, ratified in December, includes no mechanisms to stop or punish member countries from implementing protectionist policies.
In an interview with local media last week, Malaysian Prime Minister Abdullah Badawi said it was perfectly normal for countries to protect their domestic industries during an economic slowdown. Abdullah, however, modified his stance in the summit's press finale on Sunday, saying: "All of us are of the same mind: we are anti-protectionist. Countries that are saying 'buy us', countries that are engaging in protectionism - we want to engage with them."
"I think we have to pay a lot of attention, whatever measures we do, we do not give the impression that we are becoming protectionist, that we are turning inwards, because ASEAN depends on this global market," said Singapore Prime Minister Lee Hsien Loong.
The Southeast Asian blitz against protectionism - defined as economic policies restraining trade between nations by way of tariffs and quotas - was seen by some as a thinly veiled challenge to the United States. In an interview with Asia Times Online, US ambassador for ASEAN Affairs Scot Marciel admitted that " ... in the region, there are some people who have put the blame on us".
As the largest importer of Southeast Asian goods, the US's recently approved stimulus package, bent on internal spending and including mandatory American purchases from trade partners, has sent shivers through the region's export-dependent economies.
ASEAN countries have been mired in an economic slowdown that has slashed demand for computer chips, autos and commodities. According to figures released by ASEAN, the region is almost twice as dependent on exports as the rest of the world.
Singapore, Southeast Asia's most trade-reliant economy, is now technically in recession, with two consecutive quarters of negative growth, including a -3.7% year-on-year contraction in the fourth quarter.
Thailand, where exports usually account for over 65% of gross domestic product (GDP), is widely expected to be the region's next recessionary domino. In US dollar terms, Thailand's goods export growth was down 26.5% year-on-year in January. Malaysia recorded its slowest growth in seven years in the fourth quarter while the Philippines saw its goods exports contract over 40% in December.
Still, the summit was bullish about its accomplishments. Attending finance ministers agreed to boost a regional foreign currency pool from US$80 billion to $120 billion. The 10 members of ASEAN plus Japan, China and South Korea - or ASEAN+3 - had arranged to pool bilateral currency swap pacts under the so-called Chiang Mai Initiative - providing a multilateral fund that could be tapped in emergencies.
Southeast Asian currencies have slid in recent months, diminishing the ability of countries hit with short-term liquidity shortages to borrow foreign reserves from other countries to absorb selling pressure on their currencies. "We have learned from previous experience that if we work together, the damage is less when we have a currency crisis," said Malaysian Premier Abdullah, referring to a special regional meeting to address the 1997 Asian financial crisis.
ASEAN heads of state, however, warned that any global economic recovery could take years. "The financial crisis is worldwide. Each ASEAN country, each one of us is affected," said Singapore's Lee. "You could easily be in for several more years of quite slow growth worldwide. And I think it's best that we prepare for that, and our people."
Whether committed to protectionism or free trade, ASEAN countries are in for rocky economic times.
Note
1. The 10 members of ASEAN are Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam.
Charles McDermid is an Asia Times Online correspondent based in Thailand.
